Allegiant Travel Is Going Places

I continue to be in awe of how well Allegiant Travel (NASDAQ:ALGT)is doing - having monopoly status on almost all their routes sure helps. $140 oil does not knock them out, a contracting Las Vegas visitation situation does not knock them out, a bad economy for consumer discretionary does not knock them out.

As we wrote in our weekly summary they already preannounced last week that they would beat the number, so no surprise, but the individual metrics continue to impress even as we look beyond the top line figures of revenue and earnings. I was hoping for some sort of sell-the-news reaction - nothing. Even here after this huge run, it is still cheap barring a massive jump in crude oil. $4.50 seems doable at this time for 2009 - if the green shoot theorists are correct and people start criss crossing the country with their new found house ATMs - it could even get better from there.*

"The first quarter was superb, with an all-time high 31.3% operating margin," stated Maurice J. Gallagher, Jr., CEO and President of Allegiant Travel Company. "This quarter marked a return to capacity growth after last year's pullback, with modest growth in departures amplified by increases in passengers per departure and load factor. At over $108 per passenger, we slightly exceeded the range of total scheduled fare per passenger we guided for the quarter. Also consistent with guidance, we increased year-over-year total scheduled RASM by 2.1%. Costs were down substantially, driven by a nearly 50% drop in the per-gallon cost of fuel. The result was a near-tripling of operating margins and record EPS for the company.

"Looking forward, we expect second quarter costs to be substantially lower than the prior year, both because of significantly lower fuel costs and increased utilization. Fuel cost per passenger for the first half of April was slightly more than $26, substantially below the $62.48 we paid in the second quarter of 2008. Increased utilization should drive non-fuel cost per passenger below the prior year's $47.52 per passenger. On the revenue side, travelers continue to book much closer to the time of travel, making projections difficult. For this reason, we will not give revenue guidance at this time. Given current soft fare conditions, total scheduled RASM will decline year-over-year. It will be difficult to improve materially over our 90.5% scheduled load factor in the second quarter of 2008. However, we are confident unit cost savings will thoroughly overwhelm any unit revenue softness, resulting in another strong quarter.

"In some respects, the most important event of the first quarter was our acquisition of key assets from our long-time IT provider, CMS Solutions, as previously disclosed in a SEC filing. CMS has provided the software that runs much of Allegiant, including our reservation system, and the flexibility of our reservation system has been critical to our successful ancillary revenue strategy. We now have a permanent exclusive license for all CMS airline applications and have brought in-house all related development and programming."

"Our balance sheet metrics continue to lead the industry. We ended the quarter with unrestricted cash and short-term investments of $236.4 million, up from $174.8 million at the end of the prior quarter. Excluding air traffic liability, cash increased from $105.8 million to $132.9 million sequentially. Either measure is substantially in excess of quarter-end total debt of $59.3 million, down from $64.7 million at year end 2008.

"Lastly, since our previous earnings announcement, we spent $7.1 million in open market transactions to acquire 210,175 shares of the Company's common stock at an average of $33.59 per share under the share re-purchase program our Board of Directors approved in January 2009. Including open market transactions in both 2008 and 2009, the Company has repurchased a total of 763,875 shares at an average price of $29.94 returning a total of $22.9 million to our shareholders."

Guidance

Allegiant Air expects second quarter 2009 year-over-year departure growth of approximately 20% and ASM growth of approximately 22%.

Allegiant Air expects third quarter 2009 year-over-year departure growth of approximately 35% and ASM growth of approximately 40%.

Allegiant Air expects to operate 43 aircraft by the end of the second quarter of 2009 and at least 45 aircraft by the end of 2009, which is two more than prior guidance given during our fourth quarter 2008 earnings call in January.